While only 10 percent of respondents in a recent Money Management International (MMI) Back to School survey believe students should use credit cards to finance college costs, many students get their first credit card while they are in college.
In fact, 84 percent of undergraduates have at least one credit card, according to a 2009 Sallie Mae study of how undergraduate students use credit cards. Beginning February 22, 2010, college students will find it much harder to get credit as the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) goes into effect.
The CARD Act establishes new provisions for extending credit to underage consumers:
Consumers under the age of 21 must have a cosigner or an independent means of repaying the debt (such as a job). Before the cardholder reaches age 21, the cosigner is required to approve any increase in the credit limit in writing.
Unsolicited, prescreened credit card offers to consumers under age 21 are banned by the CARD Act.
Credit card companies are no longer allowed to give away promotional items on or near college campuses or at college sponsored events. With permission from universities, credit card companies may still set up tables on campus, but may no longer give away freebies (t-shirts, hats, blankets, etc.) to entice students to sign up for credit cards.
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